JSE Issues New Minimum Order Sizes for Off-Screen Derviatives Trades

February 24, 2011


JOHANNESBURG, 21 FEBRUARY 2011 – The JSE continues to raise the bar in the regulation of its equity derivatives market with increased trades being driven on-screen. Already, a portion of the trade in the JSE’s most liquid equity derivatives must occur on-screen. Last week, in a bid to improve transparency and deepen the market, the on-screen rules were applied to a further ten instruments.

The application of new minimum off-market trading rules to additional JSE equity derivatives contracts means that all trades smaller or equal to the stated minimums will have to be traded on Nutron, the equity derivatives trading platform. Minimum off-market trading rules already apply to certain equity derivatives contracts derived from constituents of the FTSE/JSE Top 40 index.

From 2002 to present, the JSE’s strategic focus for the equity derivatives market was on expanding product range to meet market demand. Now with the market maturing and a wide suite of equity derivatives available, the strategic focus has shifted to refining how these products are traded.

“We believe on-screen trading to be an important step in growing and deepening our market. As seen in other derivatives markets, the implementation of a central order book, resultant transparency and increased competition fuels the growth of a market,” says Allan Thomson, Director of Derivatives Trading at the JSE. An electronic central order book, where all bids and offers are automatically executed when trades and prices match, already exists within the JSE’s equities market.

Equity derivative instruments affected in the latest announcement include Anglo Platinum, Absa, Bidvest, Exxaro Resources, FirstRand, Gold Fields, Harmony Gold, Kumba Iron Ore, Remgro and Steinhoff.

At present, equity derivatives clients place orders with their brokers, who in turn first by the underlying share before writing and reporting a derivatives trade to the exchange. This has certain limitations, including that clients cannot see the depth of the market. Clients can also not see other market participants’ prices and therefore don’t know if they’re getting best execution.

The central order book, in contrast, will open up the market substantially, moving from a ‘captive market’ (one client, one broker) to a free market (one client, multiple brokers competing on price). This increased transparency and hence competition will ultimately benefit the client, leading to a tighter bid/offer spread.

Thomson adds: “We are confident that this move will open up the South African derivatives market to an international audience as well as encouraging algorithmic trade.”


Victoria Williams
Corporate Communications Consultants (Pty) Ltd
Tel: (011) 463 2198
Cell: 072 452 1772
Email: victoria@corpcom.co.za  

On behalf of Allan Thomson
Tel (011) 520 7082
082 377 0717